Plaintiff, since December, 1903, had carried fire insurance in the defendant mutual fire insurance company. Annually during that period he had received notice of his assessment and of the charter requirement as to payment thereof. So far as appears from the record this notice of assessment and of the policy being suspended in event of nonpayment was in substantially the same form as the notice involved in the instant case, which (with the blank portions properly filled in) was mailed to plaintiff December 8 or 9, 1931, and received *Page 41 by him in due course. The blank form of notice is Exhibit A, printed in the margin hereof.* The charter and by-laws of the company are made a part of the insurance contract. We quote the following charter provisions:
"SECTION 11. * * * He (the secretary) may cancel any and all policies at any time for the non-fulfillment of the requirements of the charter of this company on the part of the holder or holders thereof, subject to an appeal from such decision to the board *Page 42 of directors at their annual meeting, but such cancellation shall not be construed to exempt such holder or holders from payment of their proportion of the just dues of the company at the time of cancellation. * * *
"SECTION 26. Each member shall pay his assessments within 30 days after receiving such statements from the treasurer or his receiver, and in default thereof his policy may be cancelled and collection be made according to law."
By reason of plaintiff's having received notice thereof, his assessment was due and payable on or before January 10, 1932. He failed to pay the assessment. On February 29th, the insured property was destroyed by fire, resulting in a loss to plaintiff covered by the insurance in the claimed amount of $1,431.16. On March 3, 1932, plaintiff sent to defendant a check for the amount of the assessment of which he had had notice. This check was promptly returned and payment refused on the ground that plaintiff's policy was suspended by reason of his failure to pay the assessment on or before January 10, 1932. Plaintiff brought suit on the policy. The case was tried before a jury and two special questions submitted for determination by the jury. The determination of these special questions by the jury is not being reviewed in this appeal. After rendition of special verdict of the jury, the trial judge granted defendant's motion made at the close of proofs for judgment in its favor. In this connection the trial judge stated:
"The basis of this claim (plaintiff's right to recover) is that his policy was never cancelled. The charter provides for the secretary sending notice of assessment. It provides that the member shall pay within 30 days, and in default thereof his policy may be cancelled. * * * In form this notice is a self-executing *Page 43 suspension, for, automatically, upon the failure to pay on the date specified, the member stands suspended. Nothing further need be done."
It is appellant's contention that the notice received by plaintiff and above referred to by the circuit judge did not result in a suspension or cancellation of plaintiff's insurance. Appellee's contention is to the contrary. This presents the controlling issue for consideration on this appeal.
Without question the provisions in insurance contracts of mutual insurance companies or of fraternal societies pertaining to the forfeiture or cancellation of the right to insurance or benefits may be and often are couched in such terms as to render them self-executing. 45 C. J. p. 116. But it is also true that if there is any ambiguity in a contract of insurance, which contract was prepared by the insurer, as in this case, the ambiguous portion should be strictly construed against the insurer. School Dist. No. 7, Keeler Twp., v. Farmers MutualFire Ins. Co. of Dowagiac, 256 Mich. 515; Griffin v. GeneralCasualty Surety Co., 231 Mich. 642; Lilja v. StandardAccident Ins. Co., 171 Mich. 378. It is the claim of appellant that under the terms of the policy in the instant case the mere nonpayment of an assessment neither cancelled the policy or suspended the insurance, since the insured did not receive notice from the company of such cancellation or suspension after the default. And in any event if this phase of the policy (as plaintiff asserts) is ambiguous, the construction of the contract should be such as to not summarily deprive the insured of his protection. Appellant quotes and relies upon the following authorities:
"Where the policy or by-laws expressly or impliedly require some affirmative action on the part of the insurer before a forfeiture can be declared, mere *Page 44 nonpayment on the day named, without more, does not work a forfeiture." 14 R. C. L. p. 976.
See, also, Petherick v. General Assembly of Order of theAmaranth, 114 Mich. 420; Olmstead v. Farmers' Mut. Fire Ins.Co. of Ionia County, 50 Mich. 200.
"There is * * * a well-defined distinction between provisions of the character of those considered under preceding sections (where the policy contains a self-executing provision) and other cases where the fundamental law of the order or society provides that for nonpayment of dues * * * the membermay be suspended by the lodge or other judicatory; in the latter class of cases the designated authority must exercise the power to suspend, otherwise there can be no suspension, for the rules of the order must be looked to as the source of authority. * * * In such cases there must be an actual expulsion or suspension, for the fact of nonpayment does not of itself terminate the member's rights." 3 Joyce, The Law of Insurance (2d Ed.), p. 2392.
It is important to note that the insurance contract (charter, § 11) in the instant case does not provide that in the event of "non-fulfillment of the requirements of the charter" by the insured, the secretary shall "cancel any and all policies" held by such insured; but instead the provision is that the secretary "may" cancel such policies. And again it is important to note that section 26 of the charter, upon which defendant largely relies, provides as to the insured: "in default thereof (payment of assessment within 30 days) his policy may be canceled." The provision is not that failure to pay the assessment timely shall ipso facto result in cancellation or suspension of the insurance contract. Because of the provisions contained in this contract of insurance it *Page 45 must be held that nonpayment of an assessment does not automatically cancel or suspend the contract.
The appellee claims that the notice given was a notice that in the event of failure to pay the assessment on or before January 10, 1932, the policy would automatically be suspended. This gives rise to the question as to whether, in the absence of express provision therefor in the insurance contract, the insurer could give the insured a valid notice of a contingent suspension or forfeiture before the insured has actually defaulted in paying his assessment. We find nothing in this insurance contract justifying notice of contingent suspension or forfeiture in advance of default by the insured. Since the provision in the insurance contract does not, in the event of nonpayment of an assessment, automatically result in cancellation or suspension of the insurance it must be held that the contract, when fairly and reasonably construed, requires action by the insurer and the giving of notice by the insurer to the insured after the latter is in default. Plaintiff was not in default until 30 days after the claimed notice of cancellation or suspension was given. We are not here concerned with a policy by the terms of which nonpayment of an assessment automatically works cancellation or suspension. Instead, under this policy, nonpayment may or it may not so affect the contract. The outcome depends on action or inaction of the insurer. The status of the insured should not be changed without his having notice to that effect. Section 11 of defendant's charter clearly contemplates some action prior to cancellation or suspension, because it provides for "an appealfrom such decision (of the secretary) to the board of directors." Not only is there no proof in this record of notice to the insured of cancellation or suspension after he was in default *Page 46 in the payment of his assessment, but there is also a total lack of testimony that the insurer, because of plaintiff's default in paying his assessment, took any action by which cancellation or suspension was effected or of any "decision" to that effect prior to the fire loss. Under such a record plaintiff's policy must be held to have been in force when the loss occurred and defendant is liable. Such was our holding in passing upon a very similar mutual fire insurance policy inOlmstead v. Farmers' Mutual Fire Ins. Co. of Ionia County,supra. We quote a paragraph of the syllabus:
"The charter of a mutual insurance company provided that if a member did not pay his assessment within 30 days after demand his insurance might be suspended by the secretary or board of directors; but if suspended by the secretary appeal might be made to the board of directors when in session. Held, that such forfeiture could not properly be imposed as an ex parte result of mere default in payment, and without giving the assured an opportunity for hearing." Olmstead v. Farmers' Mutual Fire Ins.Co. of Ionia County, supra.
Decision in the Olmstead Case is not rendered inapplicable to the instant case, as claimed by appellee, by the fact that plaintiff herein sought to have the time within which he might pay extended by the treasurer of defendant company and such extension was not granted.
While a jury was used in the trial of this case for the purpose of rendering decision on two special questions, determination of other issues was evidently left for decision of the trial court without the aid of a jury. Neither party litigant objected to this course of procedure. It follows that, as to the amount to be recovered, determination was for the *Page 47 court. But because the trial court was of the opinion that there was no liability under the policy, the question of the amount of recovery was not reached at the hearing. The judgment entered in favor of the defendant should be vacated and the case remanded to the trial court for the purpose of determining the amount of plaintiff's recovery and the entry of judgment accordingly. Plaintiff should have costs of both courts.
POTTER, C.J., and FEAD, J., concurred with NORTH, J.
The late Justice NELSON SHARPE took no part in this decision.
* EXHIBIT "A"
FARMERS' MUTUAL FIRE INSURANCE COMPANY OF MONROE AND WAYNE COUNTIES
C.L. Miller, president La Salle, Monroe county E.S. Eves, vice-president Romulus, Wayne county P.B. Pierce, secretary Redford, Wayne county P. Papenhagen, treasurer Whiteford, Monroe county
Notice of assessment 68 and annual statement for the year ending September 30, 1931.
Township ...................................................... Name of Member................................................. Address ....................................................... The amount of your insurance is ....................... Dollars The amount of your assessment is ...................... Dollars which pay to ........................................ Collector within 30 days from receipt of this notice. See section 26 of the charter. If not paid on or before Jan. 10, 1932, your policy will stand suspended until such assessment is paid.
To the members of the company:
I respectfully submit the following statement of the condition of the company and also give you notice of assessment 68 which is now in the hands of the collector in your township.
The same is four mills, or $4 on the $1,000 insured as ordered by the board of directors at the annual meeting held in Monroe, Michigan, October 6 and 7, 1931.
See Sections 25, 26, 27 and 28 of charter.
PRESTON B. PIERCE, Secretary.